The International Energy Agency (IEA) has predicted a slowdown in global oil-demand growth for next year, citing the impact of higher interest rates on major economies. In its monthly report, the Paris-based organization forecasts that demand growth will halve to 1.1 million barrels a day in 2023, with average demand expected to reach 102.8 million barrels a day. However, the outlook for 2024 has been revised upward by 130,000 barrels a day compared to previous estimates.
The IEA attributes the loss of oil-demand growth momentum to the deteriorating macroeconomic climate, which includes the effects of higher interest rates and the fading rebound from Covid-induced lows. The organization projects a decline in global economic growth to 2.6% in 2024, down from 3% in 2023. China's growth is expected to experience a significant drop to 4.2% from 5%.
For 2023, the IEA has lowered its oil-demand growth outlook by 90,000 barrels a day to 2.3 million barrels a day. This would result in an average demand of 101.7 million barrels a day. The slowdown in oil-demand growth during the fourth quarter of this year was influenced by weaker-than-anticipated growth in Europe, Russia, and the Middle East, as well as the impact of higher interest rates and increasing petrochemical activity in China.
Europe has been particularly affected by a broad manufacturing and industrial slump, further contributing to the softening of oil demand on the continent. These factors highlight the need for cautious monitoring of the global oil market and its correlation with the macroeconomic landscape.
- International Energy Agency (IEA) - Monthly Report
Global Oil Supply Set to Increase
The Organization of the Petroleum Exporting Countries (OPEC) projects that global oil output will rise by 1.8 million barrels per day in 2023, reaching a daily total of 101.9 million barrels. This increase is primarily driven by record supply from the United States, Brazil, Guyana, and Iran.
Meanwhile, Russian crude exports experienced a decline of 200,000 barrels per day in November, dropping to 7.2 million barrels per day. Consequently, revenue fell by $2.4 billion to just over $10.3 billion.
OPEC has maintained its expectations for global oil demand at 2.5 million barrels per day for 2023 and 2.2 million barrels per day for 2024.
In an effort to support prices, OPEC and its allies agreed to voluntary output cuts of approximately 2.2 million barrels per day for the first quarter of the upcoming year.
Despite these efforts, the International Energy Agency (IEA) reported that oil prices have not seen a significant increase. In fact, they have declined by about $25 per barrel since September, reaching their lowest levels in six months by early December.
Currently, Brent crude is trading at $75 per barrel, having dropped from its peak of nearly $100 per barrel in September. Factors such as concerns about demand and market oversupply, alongside the ongoing conflicts in the Middle East, have contributed to this downward pressure on prices.